Prosecutors say he intentionally defrauded major donors

Former U.S. Congressman Steve Stockman, left, and his attorney Sean Buckley walk into the Federal Courthouse for the start of federal corruption trial against Stockman Monday, March 19, 2018, in Houston. ( Godofredo A. Vasquez / Houston Chronicle )

Photo: Godofredo A. Vasquez, Staff / Houston Chronicle

The defense team for former U.S. Congressman Steve Stockman told jurors Monday the ex- GOP lawmaker did not plot a massive fraud scheme, but said the government should have targeted two wealthy conservative donors for making illegal campaign contributions disguised as charitable gifts.

"The true motives of his donors ... was to fund Stockman, his political activities and his projects without being restricted," said attorney Charles Flood, referring to $1.25 million in tax deductible donations Stockman is accused of diverting to pay off personal and campaign costs.

Flood said investigators "believed early on this was a fraud case and they retrofitted it. They formed a conclusion and tried to back into it."

Flood and two other defense lawyers — who are being compensated by an anonymous Stockman friend — argued that while the two-time Republican lawmaker spent some of the seed money he solicited on an array of unrelated expenses, he did not deliberately trick the donors into giving him money nor attempt to cover his tracks after the money was gone.

The jury also heard closing arguments from prosecutors who portrayed Stockman as the "puppet master" behind a "deliberate and sophisticated fraud." The jury of seven women and five men are set to begin deliberations Tuesday morning. Stockman, 61, of Clear Lake, is accused in a 28-count indictment, including allegations of wire and mail fraud, violating federal election law, cheating on his taxes and money laundering.

Two top fundraising aides, who have pleaded guilty to helping in the scheme, offered testimony detailing the elaborate steps they took to move donated funds through a series of sham charities and shell bank accounts to pay off a laundry list of expenses.

But the defense lawyers centered their argument Monday on a theory they hadn't been able to explore in testimony. They said once investigators began questioning a wealthy Chicago-area shipping products entrepreneur, Richard Uihlein, the magnate's lawyers had pointed to Stockman as the architect of a carefully plotted scheme to spend the nonprofit donations.

Flood said federal investigators were "locked into their theory," that Uihlein was the victim. A theory he said was "set by the golden rule — in this case, that he who has the gold makes the rules."

He and co-counsel told the jurors that the evidence and testimony prosecutors had presented was reverse engineered to make it look like Stockman was behind a pattern of misdeeds. They said the government ignored the fact that Uihlein and Stockman's other major supporter, Baltimore money manager Stanford Z. Rothschild, Jr., had tried to send him politically motivated contributions, possibly in violation of federal law.

In closing, prosecution stressed there was no evidence to prove the defense claims that these donors meant to break the law when they made donations to what they believed were genuine charities.

In all, prosecutors questioned dozens of witnesses over three weeks of testimony — including an IRS investigator, a forensic accountant for the FBI and Stockman's own accountant — to back their theory that between 2010 and 2014 Stockman systematically planned to use the donations money however he wanted and then lied to cover it up.

Assistant U.S. Attorney Ryan Ellersick walked the jury through a series of transactions, pointing out that Stockman, a trained accountant whom a former assistant described as a "micromanger," stated in his own words in emails, texts and letters that he knew exactly what he was doing.

Ellersick quoted Stockman's letter to a doubtful government minister in South Sudan, who was questioning a humanitarian donation that included a percentage fee for the former congressman. Stockman stated in the letter, "My experience is vast ... I know what I am doing," and assured the official that while some people might be untrustworthy, his reputation was impeccable. "Leopards don't change their spots," Stockman wrote.

After reviewing how hundreds of thousands of charitable dollars were used to pay for vacations, a boat ride to view dolphins, a surveillance operation of a perceived GOP rival and other personal expenses, Ellersick repeated Stockman's own words back to the jury: "Leopards don't change change their spots."

Gabrielle Banks covers federal court at the Houston Chronicle. Follow her on Twitter and send her tips at gabrielle.banks@chron.com.

Gabrielle Banks covers federal court for the Houston Chronicle. She has been a criminal justice and legal affairs reporter for nearly two decades, including staff work at the Pittsburgh Post-Gazette and The Los Angeles Times, and freelance work for The New York Times, The Mercury News, Newsday and The Miami Herald. She has a graduate degree in journalism from Columbia University. Before her years as a reporter, she worked as a teacher, social worker and organizer.